Not many people talked about Sensex and stock markets when it was traded below 14,000 till September, 2007. When Sensex crossed the levels of 18,000, many people started investments in the stocks on the hopes 30,000 Sensex levels. Sensex deceived investors by reaching 21,000 levels and everyone knew the rest of the story.
History of Gold as investment:
See the Gold price chart below to know about the less volatile rise of Gold as investment.
Gold is traditionally treated as safe investment in the difficult times. Big investors will treat this as “Safe Hedge” when equities are not yielding good returns and when dollar is weak. Same thing happened in 2003 when equities are in down turn for 3 consecutive years. These people will sell their hedge holdings like Gold and FMCG stocks once equities make bounce back. But Gold is safe hedge against inflation.
History of gold prices (in rupees):
1930: 180 per 10 gram
1940: 360 per 10 gram
1950: 1000 per 10 gram
1960: 1110 per 10 gram
1970: 1840 per 10 gram
1975: 5,400 per 10 gram
2000: 3,000 per 10 gram
2006: 5,400 per 10 gram
2009: 15,700 per 10 gram.
Gold surprisingly gave 300% returns from 1970 to 1975 when world suffered worst ever recession after great Depression. Will the history repeat? That is the reason behind current “Mad Gold rush”. But if you invested in the Gold in 1975, your investment gave negative returns for the next 25 years.
Remember 2 things:
1. Gold generally trades in the lower range around March and July. Generally, it is the best time to buy gold and marriage season is the best time to sell God.
2. Below 11,000, Gold is a safe investment but above 15,000- it is only for traders but not for investors.
Future of Gold:
When stock markets are in down turn in 2002, Gold was at Rs 5,400 per 10 gram. Don’t forget that Gold traded below 9,000 per 10 gram till 2007 means you might have got routine returns from Gold investment. But investors who made investments in gold in mid-2007 are now making 70% returns in just 20 months. But I don’t know what will happen to gold investors who bought it at above 15,000 but they remain in losses even after 3 years. Why? Gold will recede to 11,000 levels once equities make comeback. What happened to crude oil will repeat in case of gold also. Don’t forget that Gold is not even an essential commodity. But Gold is a less volatile investment.
Examples:
1. Crude oil prices moved to $147 per barrel and Goldman Sachs people gave $200 per barrel target. It is now trading below the fundamental price at $35 per barrel.
2. Sensex moved to 21,000 and analysts and analysts gave 30,000 target. It is now trading at 9,000 levels.
3. Real Estate prices reached astronomical levels in 2007 but people bought land as if there will be no land available for purchase in future.
Interesting analysis from Zaverat:
If you invested 10,000 in various investments in the early 1999, following are the yields by 2004.
1. Fixed Deposit: 13,794.
2. PPF: 16,025
3. Gold: 15,064
4. BSE Sensex: 20,769. Equities saw the worst bear market in this time zone but gave good returns. 10,000 invested in Sensex is still 10,000 by 2002 but 20,000 by 2004.
Gold may deceive investors for some more time but investors should ask themselves some basic investment questions before making fresh investments.
1. “What is the fundamental value of the investment whether it is a share, real estate or commodities like gold?”
2. Whether the price already included the good news or not?
3. Why analysts are giving bullish estimates? Is there any truth?
4. Are there any better value based investment opportunities?
5. What are the historical moments of that investment?
6. Are we late in joining the party?
7. What is the margin of safety at current price?
My estimate on Gold:
I don’t know what will happen to the Gold in the next few days due to these “Herd investments”. But Gold will trade below 12,000 levels even after 3 years. What it means that you will not get a single rupee from Gold investments at current valuations if you are a long term investor. If you are a trader, enjoy the mania. Young investors should allocate 5-10% of your portfolio to Gold and buy at reasonable prices.
Article on Gold From 4Ps:
4Ps magazine published an article on "How to plan investments for 2009-10?". Magazine published articles on various investment options like Stocks, Commodities, Gold, Real Estate and Currency.
Highlights of the article:
Warren Buffett: Gold is the most useless commoditiy.
Stat: Rs 100 invested in Gold in 1979 is Rs 400 in 2009.
Good articles:
1. When the "Bubbles" burst?
Herd mentality is not limited to ordinary investors but even Tatas and Birlaas are now suffering under huge debt due to their mad "herd acquisitions" in the recent Bull Run. Novellis announced Rs 9,000 crore losss.
A fall below 2755 will trigger a fast fall.
Nifty held above the Pivot point today well but the spread is very very small. And volumes too.
Nifty :: An insider day with low volume.. Awaiting break out or break down.. For 20th Feb closely watch 2745/2730/2707 below it next and last support 2661.. For up swing required to break 2806.. Dow Jones exactly close near last Nov low. If it breaks last low then sentiment turn bearish for all world market. Wait for up or down breakout then trade.. In between our strategy for 20th Feb up to 2730 buy on deep (With strictly S.L 2707 as closing basis) sell at high (S.L 2825).. Resistance for up move at 2795/20806/ 2825/2838/2880.. Supports at 2745/2730/2707/2668/2661..
those who bought nifty near 2770 spot level as per call given on 17th feb..should book their profit near 2830 --spot level,,,,,,,and should do fresh intraday call---------sell nifty near 2830 spot level with 2842 spot as stoploss for tgt 2770 spot..........traders should book their profit near 2770 spot level as this 2770 level is very important level............updates will be posted later as per mkt moove................its purly intraday call....total gain in these 2 calls will be 60+60=120 points in 2-3 days..........means daily 40 points......our series of weekly gain 180--200 points rallies successfully...I am really wondering whether the amount of work I am putting in on studying the markets for whatever they are worth is worthwhile the effort. A lot of people are as it is out of the markets and the way the things are going there seems to be no end of the bad times in the stocks around the world. The participation has trickled down like any thing. The only people who are making risk free money in the markets are the brokers. The times are bad indeed. No one – even the markets perhaps know where to go from here. On day a point up and one day a point down. The charm of making – or even loosing money in the markets is just not there. The entire day if you spent staring the markets and the markets are not even kind enough to move 50 points worth on nifty – is the sign of the tired and bored markets. The markets are still stuck to the narrow band. It was perhaps a misnomer that the markets are trying to break the narrow trading band they have been caught up in. I do agree that this band has become so predictable that it can be played by the traders but the width of the markets are so small that it would be a pain I guess. On day a point up and the other day a point down. So I will not waste any time and get one with the markets.
The global cues are as confused as we are in these times. The good news is just not there and the bad news has become too boring for the markets to react on. Asia has both the red and the green ticks. Nikkei closed 0.31% up, Hang Seng Flat at 0.06% green and Strait Times down 1.31%. Europe followed the suite with FTSE up 0.29% , Dax up 0.24% and CAC down 0.05%. US opened green but now in its mid session has slipped in red and is trading – Dow down 0.58%, Nasdaq down 0.7% and S&P down 0.39%. With the kind of swings that we are seeing in the markets it is extremely difficult to predict where the markets are headed towards and it will be only after the markets end that we will come to know how exactly the markets performed.
The second day of the candle has again been a small white one but believe me I am not impressed at the moment. Combining the bodies of both the candles is not enough to pierce the last black candle we had so it conveys nothing really. Next we are in the middle of the Bollinger bands and they too do not point out in any direction and so the markets can face and move a few steps in any direction they wish. 5 EMA is below the 20 EMA and 20 EMA is below the 50 EMA so Negativity in the markets remain. The ADX is bearish but as I have been saying so many times before that when the markets start falling the ADX line loses strength. So I remain firm with my thought process. the markets should go to higher levels first before touching the lows expected out of it. MACD is negative and bearish – TRIX is flat but perhaps looking down a wee bit. RSI has looked up again after being beaten down. In the last three months the RSI has not really collapsed below the 30 marker and that is good. Volumes? Don’t even ask me. They are thinner than the thinnest milk delivered by my “Doodh wala” ever. Just falling every day.
The entire game i now of 30-50 points on nifty and on the last two days the markets are just fighting it out to protect the pivot levels. The range today was between the R1 (never touched) and the pivot – where there was a half hearted attempt to break it.
Let us see the pivot levels for whatever they are worth:
R3 2837 as against 2876 yesterday
R2 2821
R1 280
Pivot 2786 as against 2772 yesterday
S1 2770
S2 2751
S3 2735 as against 2669 yesterday
Projected High Range 2795 to 2813
Projected Low Range 2791 to 2773
Fib Projected High 2811
Fib Projected Low 2757
Market may open down with hugh gap. Market would be volatile & show significant ups and down. Market may down between 09.57 and 10.17. Market may steady or up side between 12.45 and 13.10. Market may close at down to previous closing.
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Opening Bell Call
Buy
NTPC - NTPC Limited
IFCI - IFCI Limited
MRPL - Mangalore Refinery and Petrochemicals Ltd.
BALRAMCHIN - Balrampur Chini Mills Ltd
SESAGOA - Sesa Goa Ltd.
SIEMENS - Siemens Ltd
TATAPOWER - Tata Power Co. Ltd.
On 19th February 2009 - The BSE Sensex closed at 9042 (up 27 points) while the NSE Nifty closed at 2789 (up 13 points).
Opening Bell Call
Sell
HINDALCO - Hindalco Industries Ltd.
IBREALEST - Indiabulls Real Estate Limited
INFOSYSTCH - Infosys Technologies Ltd.
NAGARCONST - Nagarjuna Construction Co. Ltd
RPOWER - Reliance Power Limited
Technical Analysis for 20th February 2009
BSE-SENSEX - Major Resistance - 9043, 9077, 9110, 9144, 9177, 9211, 9244, 9277
BSE-SENSEX - Major Support - 9010, 8976, 8943, 8909, 8876, 8842, 8808, 8774
NSE-NIFTY - Major Resistance - 2786, 2796, 2805, 2813, 2821, 2831, 2840, 2850
NSE-NIFTY - Major Support - 2778, 2770, 2761, 2751, 2743, 2735, 2727, 2719
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